The sealed-bid mechanism: An experimental study

Roy Radner, Andrew Schotter

    Research output: Contribution to journalArticlepeer-review

    Abstract

    This paper presents the results of a set of experiments performed to test the properties of a bargaining mechanism (called the sealed-bid mechanism) used to structure bargaining under incomplete information. Our results indicate that the mechanism performs quite well. When using it, experimental subjects are able to capture a large portion of the potential gains from trade. In addition, the behavior of the subjects is qualitatively consistent with one particular equilibrium of the mechanism, namely, the one with linear bidding strategies. Finally, an experiment performed allowing experienced subjects to repeat the experiment for relatively large numbers of rounds, suggests that, with enough experience, other equilibria may appear, in which the subjects use "step function" strategies.

    Original languageEnglish (US)
    Pages (from-to)179-220
    Number of pages42
    JournalJournal of Economic Theory
    Volume48
    Issue number1
    DOIs
    StatePublished - Jun 1989

    ASJC Scopus subject areas

    • Economics and Econometrics

    Fingerprint Dive into the research topics of 'The sealed-bid mechanism: An experimental study'. Together they form a unique fingerprint.

    Cite this